ECLAC estimates that in 2010 Chinese multinationals invested more than 15 billion dollars in LAC. China thus became the third largest foreign investor in the region with a 9% share behind the US and the Netherlands which account for 17% and 13%, respectively. More than 90% of those investments went to natural-resource extraction, mostly in the oil and gas sector and, to a lesser extent, in mining. Sinopec made the largest investment and acquired 40% of the Brazilian operations of Repsol-YPF for 7.1 billion dollars. Oil companies CNOOC and Sinochem also announced major acquisitions in Brazil and Argentina, respectively. In mining, Chinalco and Minmetals (in Peru) and Wuhan (in Brazil) announced large investments. Huawei and ZTE are prominent investors in telecommunications and BYD; Chery and Geely, in the auto industry. By country, the main destinations for Chinese FDI are Brazil, Argentina and Peru, all of which have strong trade links with China. China is also a significant investment source for some smaller economies such as Ecuador and Guyana, however, Chinese FDI in Mexico and Central America is almost negligible (with the exception of Costa Rica). Chinese investments announced in Latin America and the Caribbean in 2011 amount to 22.7 billion dollars. Time will tell whether this is a temporary spike or the start of a new phase of economic relations between China and the region in which strong trade links are accompanied by growing investment in natural resources, manufactures, infrastructure and services.

3.
I. Review of China and U.S. relations with
Latin America
 Not so long time ago Latin America was considered the
“backyard” of U.S. but this is changing.
 US has been the biggest investor in the region, the biggest
trading partner, the biggest donor of economic
cooperation, and exerted strong political influence in the
region.
 There was a time it was said: “When the U.S. economy
sneezes, Latin American countries catch a cold”
 China emergence as an economic power and its appetite
for natural resources, and food, of which Latin American
countries have in abundance, is challenging U.S. position.
 China is now the biggest trade partner of Argentina, Brazil,
Chile and Peru. China has FTA with Chile, Costa Rica and
Peru

4.
Merchandise trade
 In 2010 U.S. exported to South and Central America 137
billion dollars, it was 58 billion in 2000 (and to Mexico 163
billions and it was 112 billion in 2000) and imported 136
billion dollars, it was 77 billion in 2000 (and from Mexico
232 billion dollars and it was 137 billion in 2000) (Table I:13 and
A11 http://www.wto.org/english/res_e/statis_e/its2011_e/its2011_e.pdf)
 The same 2010 year China exported to South and Central
America 69 billion dollars (5 billion in 2000) and imported
84 billion dollars (4 billion in 2000) (Table A14
http://www.wto.org/english/res_e/statis_e/its2011_e/its2011_e.pdf)
 As we see trade between U.S. and South and Central
America grew just twice last decade (to 273 billion dollars),
but with China it leaped nearly seventeen times (to 153
billion dollars).

5.
Trade in manufactures
 China is the third biggest trade partner of Latin America,
after EU and the US (or the second if only country partner
is considered).
 In the year 2010 US exported 94 billion to and imported 37
billion dollars from South and Central America in
manufactured goods.
 The same year China exported 65 billion to and imported 7
billion dollars from South and Central America in
manufactured goods. (Table II.29
http://www.wto.org/english/res_e/statis_e/its2011_e/its2011_e.pdf)
 As we see nearly 27% of U.S. imports from the region
were manufactures, but the figure for China was a little
more of 8%.

6.
Trade
 See evolution of trade between US and Latin America, and
China and Latin America from 1990 to 2010 (from Osvaldo
Rosales: “Vision Group’s Role for the Development of FEALAC: Latin American
perspective” 1st FEALAC Vision Group Meeting, Seoul, Republic of Korea, March 13,
2012 http://www.fealac.org/2011/news/board_view.asp?txtIdx=130)

7.
Asia-Pacific, and especially China, has been a key factor in
diversifying markets for the region. However, the dynamism
of AP does not lie solely in China
A. Exports B. Imports
LATIN AMERICA AND THE CARIBBEAN, INTERNATIONAL TRADE, BY MAJOR PARTNER, 1990-2010
(Share in regional total)
Source: ECLAC based on COMTRADE.

8.
Trade
 China exports mostly manufactured goods to the region
and buys from them mostly raw materials.
 It is an asymmetric trade relationship
 For example 55% of Chile exports to China is copper, 53%
of Argentina exports is soybeans, 78% of Venezuela is oil,
and 38% of Peru exports to China is copper.
http://www.china-files.com/es/link/17025/mas-que-amenaza-u-oportunidad-china-es-una-realidad-en-amer
 If we consider trade in services, US trade with L.A. is
overwhelmingly bigger than trade in services of China with
L.A.

9.
Investment
 Regarding Chinese investment in Latin America, this has jumped from
a few million dollars a couple of years ago to about US$15 billion in
2010, with most of the money going into mining and other extractive
industries in Brazil, Peru and other nations, and jumped again last
year 2011 to about US$23 billion (Taipei Times, April 20, 2012
http://www.taipeitimes.com/News/biz/archives/2012/04/20/2003530766)
 Still US and Spain are the biggest investors in Latin America as seen
in the following graphic (from Osvaldo Rosales: “Vision Group’s Role for the Development
of FEALAC: Latin American perspective” 1st FEALAC Vision Group Meeting, Seoul, Republic of
Korea, March 13, 2012 http://www.fealac.org/2011/news/board_view.asp?txtIdx=130)
 China investment is mainly in mining, while US investment is more
diversified
 China investment is made by state companies and so has the backing
of its government.

11.
Economic Cooperation
 China through entities like Export-Import Bank of China
(Eximbank) and the China Development Bank (CDB), is
lending money to Latin American countries, specially to
countries like Ecuador and Venezuela that can not go the
international financial markets. Both entities lent more
money to L.A. in 2010 than the World Bank, IADB and US
government together. http://www.china-files.com/es/link/17082/america-
latina-encuentra-en-china-a-su-banco-de-cabecera
 China is a member of the IADB
 US was and still is for many countries, the main donor of
aid, but sometimes it is said that most this is for fighting
drug traffic, something that is subject to critics as seen in
the discussions of the last Summit of the Americas (April
14th
and 15th
, 2012, Colombia).

12.
Political Relations
 Workers remittances from US are also important for L.A.
 The theme of immigration is also a point of contention
between US and L.A.
 Several Latin American countries, like Ecuador,
Venezuela, Bolivia, has warmer relations with China than
with the US.
 Even some L.A. countries are having military exchanges
with China
 Several L.A. heads of state have visited China, even
several times, but not US.
 Rise of CELAC and UNASUR as alternatives to the OAS
to weaken US influence
 So it seems US influence is waning while China one is
rising.

13.
II. Case study: Peru
 Why Peru?
 Peru was the first country in Latin America to receive large
scale immigration from China, starting 1849
 Because of that Peru has the largest community of
Chinese in Latin America
 Peru was the first to establish diplomatic relations with
China, in 1874
 Peru was the first to receive large scale FDI from China
FDI in 1992.
 Peru main trade partner is now China, and it has a FTA
with it.

15.
Trade
 U.S. was traditionally the biggest trade partner of Peru,
now it is China. Last year 2011 China overtook the U.S.
 Peru exported in 1993 around 3,344 million dollars, of
which 695 million dollars was to U.S. and to China 140
million dollars.
 But in 2011 Peru total exports were 45,636 million dollars,
of which 5,808 million dollars went to U.S. and to China
6,961 million dollars.
 Still U.S. is the major source of imports, with 7,349 million
dollars while from China was 6,321 million dollars, in the
same year 2011.
(http://www.aduanet.gob.pe/aduanas/informae/BalContiZonaPais_01122011.ht
m)

16.
Trade
 Peru sell mainly raw materials to China, around 95% are
minerals and fishmeal
 Peru sell to U.S. also raw materials, but in the last years
the export of garments, textiles and agro industrial goods
has increased (thanks in big part to the FTA between them
in effect since 2009).
 Peru has a FTA with China in effect from 2010.
 But Chinese imports are, for some Peruvians companies,
unfair competition because of dumping and subsidies.
 A representative case is of Chinese shoes, which even if
they have antidumping duties imposed on them from the
year 2000, have came to dominate the market for imported
shoes.

17.
Number of imported Chinese shoes and share in the market of
imported shoes (in thousands –right hand-, and in %)
Source: Quarterly Dumping and Subsidies Bulletin of Indecopi, december 2011, pag 5:
http://www.indecopi.gob.pe/repositorioaps/0/5/bol/boletin_dumping_y_subsidios/Dic11CFD.pdf

18.
Trade
 Peru has subject several Chinese goods to antidumping
duties, 9, more than to any country, at the end of 2011.
 U.S. has one antidumping duty and one countervailing
duty, to the same product, biodiesel.
 The complaint is also about the asymmetric trade
relationship, because Peru sell mostly raw materials to
China but buy from it manufactured goods.

19.
Number of antidumping duties, by country of origin, as of
December 31th, 2011
Source: Quarterly Dumping and Subsidies Bulletin of Indecopi, december 2011, pag 22:
http://www.indecopi.gob.pe/repositorioaps/0/5/bol/boletin_dumping_y_subsidios/Dic11CFD.pdf

20.
Foreign Direct Investment (FDI)
 FDI to Peru began to increase from the decade of 1990s
 At the end of the year 1990 the stock of FDI was only 1.2
billion dollars and at the end of year 2011 the stock of FDI
was 22.0 billion dollars.
 In the year 1990 U.S. investment was of 619 million dollars
(half of the total FDI to Peru) and in the year 2011 was of
3.01 billion dollars (the second after Spain).
 China investment in Peru was nil up to 1992. That year,
Shougang Corporation ( 首钢集团 ) bought the state
company Hierro Peru that exploits iron ore. It was the first
big sale of a Peruvian state company after the government
began in 1990 a process of economic reforms and opening
of the economy to foreign investment.

23.
Investment
 It was one of the first biggest investments by a Chinese state company
in a foreign asset. Shougang paid around 120 million dollars for the
mine that is the only one that produces iron ore in Peru.
 Now China is the tenth biggest investor with a total of 736 million
dollars (end of 2011) Table 2. There is more Chinese investment but it
does not appears as that because some is made from offshore
financial centers (OFCs).
 (http://www.proinversion.gob.pe/1/0/modulos/JER/PlantillaStandardsin
Hijos.aspx?ARE=1&PFL=0&JER=1747)
 US investment in Peru is mainly in mining, industry (manufacturing),
finance and energy
 China investment is almost exclusively in mining. Currently there are
big investments, like in Toromocho by Chinalco (Aluminiun Corp of
China), of around 2.2 billion dollars.

24.
Economic Cooperation and Political relations
 There has been high levels visits between Peru and China
 There was more opposition to a FTA with US than to a one
with China.
 Confucius Institutes are being established to promote
China language and culture
 China influence in Peru economy is getting bigger, to the
point that the Minister of Economy and Finance of Peru
said last October that he “prays every day” for China
economy to continue growing at high rates, so high price of
raw materials and demand from China will remain. (“When
the China economy sneezes, Peru and Latin American countries
catch a cold”?)
 But Peru has also a good relationship with US.

25.
Why China is more attractive to Latin
America countries?
 Latin America has benefited from strong demand for their
raw materials from China, and for the high prices for them
 Also available cheap manufactured goods from China
have elevated the standard of living of many of the region
people, especially the poor.
 China is eager to buy raw materials and pays a good price
for it
 China does not lecture them on human rights, democracy
and so on
 China big and growing market is an attraction by itself.
 China and L.A. countries are both developing ones.

26.
Problems in relation to China
 Asymmetric trade (complementary economies?)
 High price of raw materials depend on China strong
demand for them.
 Problems of unfair competition from China
 China is buying land, like the one bought by Heilongjiang
Beidahuang State Farms Bussiness Trade Group in
Argentina, around 300 thousands hectares.
 China and L.A. are still very far from each other, there is a
need of more direct flights.
 Cultural barriers remain
 China interest in the region is also political, because of 23
of Taiwan diplomatic partners, 12 are in Latin America

27.
What is needed in China L.A. relationship?
 While many developed countries are battling with low
growth or even recession, China and Latin America
nations experience robust growth.
 They are middle-income countries with a growing middle
class, where internal demand is playing a bigger role in
fueling economic growth.
 China and Latin American countries, however, need to
strengthen their trade, investment and other economic ties,
and expand their people-to-people exchanges.

28.
III. What should U.S. do?
 L.A. countries are more confident because they are
growing, while the US economy has problems
 US should sign more FTA with Latin American countries,
open its market. Put its economy in order and growing
again.
 Latin American growing markets are also an attraction to
the US
 US market is still very attractive; the biggest in the world,
especially for L.A. manufactured goods. And it is also
geographically close.
 Still US is seen as a country to look for, and even if its
economic influence diminishes, its cultural one will remain.
 Latin America need to diversifies its trade and take
advantage of China and US markets.

29.
IV. Conclusions
 China influence in L.A. is growing as it increase its trade,
investment and economic cooperation with the region
 But still there are issues in that relations like the
asymmetric trade, investment focused in raw materials,
and the problem with selling manufacturing goods in the
Chinese market
 US will remain influential for the time being
 And US attraction is not only economical but also cultural,
among other things.
 But US have to be more open to L.A. needs and work
together in solving regional problems (war on drugs,
immigration, economic integration, Cuba admission to the
OAS, etc.)